Barron's reports that shares of Whole Foods (WFMI) are cheap as the shares have pulled back 17% after the same-store sales increase was lower than the gains of the previous 11 quarters. Whole Foods remains an innovative retailer on an aggressive path toward expansion in a market that still shows enormous promise. The stock's valuation is still high compared with other retailers, and the shares are vulnerable to any further signs that sales growth is tapering.
As Wal-Mart's (NYSE:WMT) entry into the field suggests, more competitors could arrive on the scene. But, because Whole Foods has turned grocery merchandising into something of an art, it may be sheltered from competitive threats. Whole Foods, which goes out of its way to procure quality products, even has its own dedicated fishing fleets. In no way is this a strong buy but long term it is a category killer in a dynamic niche. Plus, the balance sheet is strong.